IMPORTANT POINT
Amount received by the dealer for supply of parts to the customers as a part of the warranty agreement held liable to tax under the Uttar Pradesh Trade Tax Act, 1948.

JUDGMENT

Arijit Pasayat, J.-These two appeals relate to a common judgment rendered by a learned Single Judge of the Allahabad High Court. The appellant (hereinafter referred to as the assessee ) was a dealer registered under the Uttar Pradesh Trade Tax Act, 1948 (hereinafter referred to as the Act ), for the relevant assessment years i.e. 1990-91 and 1996-97. The only question involved in these appeals is whether the amount received by the assessee for supply of parts to the customers as a part of the warranty agreement was liable to tax. The assessee was an agent of M/s Mahindra and Mahindra (hereinafter referred to as the manufacturer ). The manufacturer had warranty agreement with the purchasers of vehicles (hereinafter referred to as the customers ) to replace defective parts during the warranty period. As found by the taxing authorities and the High Court, the manufacturer made payment for certain price as the parts were supplied by the assessee to the customers. Credit notes were issued by the manufacturer to the assessee in respect of the price of the parts supplied to the customers. The assessing officer was of the view that the payments received through credit notes amounted to a sale in terms of Section 2(h) of the Act. Said Provision, so far as relevant reads as follows:

"(h) `Sale with its grammatical variations and cognate expressions, means any transfer of property in goods (otherwise than by way of a mortgage, hypothecation, charge or pledge) for cash or deferred payment or other valuable consideration and includes."

2. Accordingly tax was levied for the two assessment years in question.

3. The orders of assessment were questioned before the Commissioner (Appeal), Varanasi who upheld the assessments by common order dated 20.6.2001. The matter was carried in appeal before the Trade Tax Tribunal, Varanasi (in short Tribunal ) by the assessee which placed reliance on certain decisions of different High Courts and came to hold that there was no sale. The matter was carried in revision by Revenue before the Allahabad High Court. The High Court set aside the order of the Tribunal and held that the transactions constituted sale attracting levy of tax.

4. In support of the appeals, learned counsel submitted that the position in law is no longer res integra. In Premier Automobiles Ltd. & Anr. etc. v. Union of India (1972 (2) SCR 526) it was clearly held that the replacement of defective parts during the warranty period would not involve any sale. Reliance was also placed on decisions of the Delhi, Madhya Pradesh and Kerala High Courts reported in Commissioner of Sales Tax, Delhi Administration, Vikas Bhawan, New Delhi v. Prem Nath Motors (P) Ltd. (1979(43) STC 52), Prem Motors v. Commissioner of Sales Tax, Madhya Pradesh (1986(61) STC 244) and Geo Motors v. State of Kerala (2001 (122) STC 285). It was submitted that the assessee, as part of the warranty agreement, replaced the defective parts. There was a contractual obligation for the same and, therefore, there was no sale involved.

5. In response, learned counsel for the revenue submitted that the transaction between the assessee and the manufacturer was a separate transaction. It is not the case of the assessee that the manufacturer had supplied the goods to the customers. If it had supplied parts to the customers through assessee; the position may have been different. The manufacturer was obligated to make the replacement. If it did not possess the parts to meet the contractual obligation, it would have purchased the parts from any seller of the parts and would have paid the sales tax. In the instant case, the assessee had supplied the goods for which it received the consideration by way of credit notes and/or other mode of payment. That being the position, the High Court was justified in its view about the taxability of the transactions.

6. The decision in Premier Automobiles case (supra) is really of no assistance to the assessee. The fact situation there was differ